Governments and businesses in Southeast Asia are racing to prevent energy shortages as the Strait of Hormuz remains closed due to the ongoing conflict between the U.S. and Israel over Iran.
To cope with potential shortages, various measures are being implemented. For instance, the Philippines has shifted to a four-day work week. Thailand and Vietnam have encouraged remote working and limited travel, while Myanmar has started alternating driving days.
In efforts to stabilize fuel prices, Thai Prime Minister Anutin Charnvirakul has announced a temporary diesel price cap. Vietnam is using its fuel price stabilization fund to combat rising costs. According to Priyanka Kishore, an economist at Asia Decoded, these actions are just the beginning. “They’re trying to manage the situation before it hits them hard,” she noted.
Despite having some fossil fuel reserves, Southeast Asia heavily relies on imported oil and gas, with much of it passing through the Strait of Hormuz. Recent data reveals that around 84% of crude oil and 83% of liquefied natural gas (LNG) destined for Asia in 2024 traveled through this crucial shipping lane. China, India, Japan, and South Korea make up nearly 70% of these shipments.
Countries like the Philippines, Thailand, Malaysia, and Brunei are particularly vulnerable since they import between 60% and 95% of their crude oil. Even Indonesia, a known oil producer, depends on imports for more than a third of its crude supply. This reliance highlights a worrying trend as the supply chain disruptions grow.
As countries scramble to replace lost supplies, Vietnam plans to procure about 4 million barrels of crude from outside the Middle East. However, experts warn that this amount is not sufficient. Sam Reynolds from the Institute for Energy Economics pointed out that with Vietnam’s reserves only covering about 20 days of consumption, there’s a significant risk of shortages.
The situation calls to mind previous energy crises. For instance, during the 1973 oil embargo, countries reacted with rationing and shifts in energy policy. Today, Southeast Asia’s emergency fuel reserves lag behind those in Northeast Asia. Japan has reserves for 254 days, South Korea for about 208 days, and China for around 120 days.
In response to the current crisis, Thailand has already banned oil exports while China has also placed restrictions on fuel exports. Meanwhile, petrochemical companies across the region are facing supply disruptions, leading some, like Thailand’s Rayong Olefins, to halt operations due to a lack of raw materials.
The impact of these disruptions could lead to higher prices for consumers and increased restrictions on oil and gas use. The Economist Intelligence Unit has forecasted that global oil prices could average $80 per barrel in 2026, affecting inflation and economic growth across Asia. Kishore warns that if conditions do not improve, Southeast Asia may face a recession within weeks.
In summary, the ongoing closure of the Strait of Hormuz poses a significant challenge for Southeast Asian nations. With heavy reliance on oil imports and limited reserves, the region must act quickly to navigate this unfolding crisis.
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